Correlation Between BORR DRILLING and KCE EL

Can any of the company-specific risk be diversified away by investing in both BORR DRILLING and KCE EL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BORR DRILLING and KCE EL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BORR DRILLING NEW and KCE EL PCL, you can compare the effects of market volatilities on BORR DRILLING and KCE EL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BORR DRILLING with a short position of KCE EL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BORR DRILLING and KCE EL.

Diversification Opportunities for BORR DRILLING and KCE EL

0.87

Correlation Coefficient

BORR DRILLING  KCE EL

Very poor diversification

The 3 months correlation between BORR and KCE is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BORR DRILLING NEW and KCE EL PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCE EL PCL and BORR DRILLING is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BORR DRILLING NEW are associated (or correlated) with KCE EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCE EL PCL has no effect on the direction of BORR DRILLING i.e., BORR DRILLING and KCE EL go up and down completely randomly.

Pair Corralation between BORR DRILLING and KCE EL

Assuming the 90 days horizon BORR DRILLING NEW is expected to under-perform the KCE EL. But the stock apears to be less risky and, when comparing its historical volatility, BORR DRILLING NEW is 2.17 times less risky than KCE EL. The stock trades about 0.0 of its potential returns per unit of risk. The KCE EL PCL is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  34.00  in KCE EL PCL on October 4, 2024 and sell it today you would earn a total of  32.00  from holding KCE EL PCL or generate 94.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

BORR DRILLING NEW  vs.  KCE EL PCL

BORR DRILLING NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BORR DRILLING NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

KCE EL PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCE EL PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BORR DRILLING and KCE EL

The main advantage of trading using opposite BORR DRILLING and KCE EL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BORR DRILLING position performs unexpectedly, KCE EL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in KCE EL will offset losses from the drop in KCE EL's long position.

The idea behind BORR DRILLING NEW and KCE EL PCL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.